By itself, the Abbott government’s deregulation of university fees is not enough to create a market-oriented higher education industry. Consumer sovereignty must play a much bigger role if deregulation is to meet the government’s goal of encouraging genuine competition.

For this to happen, some universities have to respond to student needs by concentrating primarily on teaching. Fortunately, Education Minister
Christopher Pyne
told Thursday’s The Australian Financial Review he intends to allow “teaching only" universities to exist and help put downward pressure on fees.

It is unclear if this change alone will eliminate the existing promotion system’s pervasive bias towards research/academic publication which prevents universities from putting a much stronger emphasis on teaching.

Some universities will continue to focus on research, particularly if they want to move up international rankings that emphasise this area. But the systemic bias against teaching can’t continue if students are to receive value for money in an era of rising fees. In the United Kingdom, the Cameron government’s trebling of fees has prompted some universities to reject research funding so they can meet student demand for a greater emphasis on teaching.

Students are not Australian universities’ only customers. The government gives combined grants for research and teaching, as well as specific research funding. Most universities use part of their student fee income for research, but don’t provide figures for how these untied grants are split between teaching and research. Acting vice-chancellor of the University of NSW, Iain Martin, told this column that its academic staff, on average, spend about 40 per cent of their time on research, 40 per cent on teaching and 20 per cent on administrative duties. So do most of its counterparts. General administration staff account for 47 per cent of UNSW’s employee costs.

Threefold fee rise expected

Apart from relatively small amounts from other sources, Martin says the government currently contributes about 60 per cent of a university’s funding. The other 40 per cent is from domestic student fees.

Martin says fees will rise following the 20 per cent cut in government funding accompanying deregulation. The architect of the existing repayment system incorporating an income-contingent loan, Australian National University’s Professor Bruce Chapman, says he expects most universities will increase charges to international student fee levels – currently about three times higher than for domestic students.

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Repayments will rise further with the budget decision to charge interest at the government bond rate instead of indexing to inflation. The change will also apply to existing debt for deferred fees and student loans, which governments previously promoted as interest-free. If the Abbott government wants to “share the pain", here’s an idea – it could impose delayed fees on those who graduated between the abolition of fees in 1974 and their restoration in 1988.

While there is a reasonable case for today’s students to pay higher fees, the new interest charge will also boost debt. Graduates generally earn more than non-graduates. Often, some courses don’t generate a higher income than many tradesmen earn. That’s fine, but it is likely to add pressure to keep fees as low as possible or ensure staff spend more time helping students learn.

One option would be for universities to take advantage of Pyne’s abolition of the requirement that all staff have to engage in research, regardless of the quality of the output. Some academics could then spend up to 80 per cent their time on teaching and learning.

A common criticism is that much routine university research merely results in rarely read articles of little ongoing value published in academic journals. Yet official figures show universities spent about $5.3 billion on research in 2012, on top of $1.6 billion from the main research funding bodies. The $5.3 billion also dwarfs spending on well-regarded specialist agencies such as the CSIRO.

No research-teaching link

While it’s hard to generalise about the quality of what the $5.3 billion produces, it would be surprising if a better outcome did not result from switching $1 billion to improved teaching and $1 billion to specialist research centres.

Contrary to claims by supporters of the existing system, a Grattan Institute report last July said empirical analysis showed there was no link between doing research and better teaching. The report’s author, Andrew Norton, an advocate of deregulation, wants to change the current situation where many academics have no training in teaching or have taken only short courses.

Pressure on fees could be lowered if outstanding international teachers delivered the main lectures online, backed by local staff for small group tutorials and feedback on student questions and course work. Some small United States universities, however, retain local delivery of all lectures by staff who must have specialist teaching skills.

In an example that Forbes reported in January, teachers at Minnesota’s Rochester University spend around 30 hours a week in face-to-face contact with students in a four-year health science degree. After a relatively small government subsidy, the annual fees are about $US13,000 ($13,950).

Following deregulation, fees for less face-to-face contact for a science degree at a mid-ranking Australian research university will be about $26,000 – if they rise, as Chapman predicts, to the same level as now paid by foreign students.